10-37

Name: SOLUTION Enter the appropriate amounts in the shaded cells in columns F, H and J and the appropriate account titles in columns B and C.

1)

Computation of Market Value of Bond

Amount

Face value of bond Semiannual interest Market value of bond

$ 100,000 5,000

x x x

PV Factor

0.4564 13.5903

$ 45,640 67,952 $ 113,592

Journal Entry Cash Bond Payable Premium on Bonds Payable 2)

113,592 100,000 13,592

Computation of Cash Paid, Amortization and Interest Expense Face Value x Rate a. Cash paid for interest $ 100,000 x 10%
Premium

$ 10,000

b. Premium amortized

$ 13,592
Cash interest

/ /

Years

10

1,359

c. Interest expense 3)

$ 10,000

- premium amortized 1,359

8,641

a. Direct Method Cash flows from operating activities Cash receipts from customers Cash payments for Inventory $ 172,000 Interest expense 10,000 Other expenses 82,000 Net cash provided by operating activities b. Indirect Method Cash flows from operating activities Net income Adjustments: Depreciation Amortization of bond premium Increase in accounts receivable Decrease in inventory Increase in accounts payable Net cash provided by operating activities

$ 293,000

264,000 $ 29,000

$ 14,859 14,500 (1,359) (7,000) 6,000 2,000 $ 29,000